Wednesday, March 4, 2015

Teaching Illiteracy

Lord Redbrick: Oh! I don't like what you're incinerating.
Lady Bluebury: The proper word is "insinuating", illiterate.
Lord Redbrick: I am not illiterate! My parents were married!

My sons were asking me about credit cards, debit cards, cash and checks on the drive home from school today. At first I was pretty excited that they were getting some financial education from school as well as from home. Then I looked at the homework.  I've included their homework in this post, along with the answers I would give (just click on the homework pages below to see the actual questions and my answers).

The first question that caught my attention started with these statements:
Walter has a part time job at the local discount store. He has a checking account and a small savings account. He struggles to pay his bills because he does not make much money.
Wow. That last statement floored me. Poor Walter does not struggle to pay his bills because he does not make much money. Walter struggles to pay his bills because he spends too much money.

Don't get me wrong, I understand there are people that struggle. They struggle to find employment, as poor Walter only has a part time job. However, whatever your income, you need to cut expenses to fit within it, or you will start going backwards and fast.

After going over the boy's homework, it made more sense to me why Texas is 46th in poverty rate in the United States. This is not just the teacher's choice in homework. The pages bear the logos of Texas Council on Economic Education and Teas Credit Union Foundation. I love Texas, but the poverty rate is something that I wish would change and this homework is doing just the opposite.

The rest of the homework went into the advantages and disadvantages of various forms of payment: credit card, debit card, check and cash. It all felt like it was one of those coloring books you can get from the bank extolling the virtues of getting into debt.

And that was just the setup. The two questions that followed were equally amazing:
How should Walter pay for dinner at a restaurant? How should Walter pay for a new television set?
No wonder Walter has a hard time paying his bills. He should be at home opening a can of Campbell's and reading a good book, instead of spending money eating out and buying electronics. In fact, instead of spending all that money, I would recommend he invest $25 in the book Financial Fitness to read with his tomato soup.

I see so many people that have the latest iPhone, cable TV, big screen TVs, eat out fairly regularly and can't seem to make ends meet. This type of homework seems to assume this mentality, the keeping up with the Jones' at any cost.

The next page of homework was a little better. Here is the setup:
Max has a good job. He has a checking account and savings account. Max pays his credit card bill on time and he pays the entire balance each month.
Terrific! Max pays his full credit card bill each month. On the surface this looks like a person in a solid financial position (and I would have thought that 6 months ago). The problem here is the first sentence. What does a good job mean? Does it mean he is guaranteed not to be fired? That the company he works for won't be acquired or go under?

Here is the problem with Max's situation. He basically has an interest free 30 day loan for all the purchases. Every month. If something beyond Max's control happens, like his company being acquired and his division being let go, Max might have a period of time where he has to live on his savings. To add to the problem, he would need to take a month's worth of expenses from his savings to pay off his card, or face high interest rates that will start eating into his savings more than he thinks.

This was pretty much the situation my wife and I were in before we started going through Financial Fitness Pack. We always paid our credit cards off every month. What hit us was an unexpected monthly expense that we took on caring for a relative. We thought everything was in hand, but the credit cards masked what was happening. We had a slow leak that, over two years, caused us to push the envelope on being able to pay off the credit cards.

After hearing about the Dunn & Bradstreet study that found that people spend 12%-18% less when they use cash versus cards, we decided to finally use the cash-envelope system. This is when it struck me that I had a constant 30-day loan from the credit cards. We had drained our savings and couldn't pay off the credit cards and also pay cash for our expenses. 

The Financial Fitness Pack had an answer for that too. We've been following the system prescribed, but more importantly, we're receiving a first rate financial education (CPAs can get 22 credits of continuing education with the pack). Since using the cash-envelope system and the debt paydown, we have a plan to not just pay off those credit cards (and medical debt), but also pay off both mortgages (again with the relative, oi).

The rest of the homework was a page each on the Pros and Cons of the various payment methods; credit cards, debit cards, checks and cash.

The Credit Card page seemed pretty straightforward. One of the advantages/disadvantages plays right into the idea that debt is a good tool if you are broke.
If there is an emergency and no money is available, a credit card can be used to pay for the emergency.
Robert Kiyosaki says, "Only borrow money when you don’t need it." And there is a good reason for that. It is natural for people to assume that this is just a bump in the road and they will be back on their feet soon. However, borrowing money when you are in financial straights only worsens the problem and often the bump is a little longer than expected, especially with high interest rates of credit cards.

The Convenience category had me going back and forth as to if it is an advantage or disadvantage. This is possibly why people spend 12%-18% more when using credit cards. It is a little too convenient.

Checking seems to be a bit of a relic. There were elements of checks I had forgotten about (proof of payment). However, I haven't written a check in quite a while. I use online bill pay to replace a lot of the checks I used to write. There are a few downsides they do gloss over. 

It seems that the homework assumes that with checks you need to balance a checkbook. The problem is that mistakes are common, which leads to overdraft fees.

And the biggest gloss-over is that you need to trust the person you send the check to. Checks have your account number and the banks routing number on it. A decade ago that wouldn't be a big deal. But with all the innovations in banking these days, identity thieves often find holes in new services which allow them to drain bank accounts with just those numbers.

I'm not as familiar with Debit cards, so in filling out this sheet I had to do some homework. I knew you had the added security of needing the card and a PIN number. You don't have the same guaranteed fraud protection that you have for credit cards. I thought that the "limit" for the card was what you had in your account. It turns out there are some bad debit cards out there, that will allow you to overdraft a debit card.

That limit can also cause some problems, specifically when renting a car, hotel room, getting gas or purchases at a bar. In these cases, these merchants put a hold on your card for expenses that you might incur. For credit cards, which usually (or at least should) have a limit far beyond what you normally charge, it's not a big deal. However, for debit cards this can lock up your funds for days. So for the road trips, use cash or credit, or you could have your entire checking account tied up with holds.

And then we come to cash. For cash they didn't have any pre-filled advantages/disadvantages. I thought that was interesting. For advantages, I had that it is nearly universally accepted, and by human nature you will typically spend 12%-18% less than with cards. For disadvantages, once you lose cash, it is lost. So don't lose your cash. 

A bit of a stretch on the disadvantages, I put down that cash is a bit less convenient. I think cash is more convenient than checks (a bit of a pet peeve at the grocery store, but I digress).

My recommendation? Put together a program written by someone who has financial success. Don't let the banks write the curriculum (fox watching the hen house?) 

If it were up to me, I'd have them study the book Financial Fitness for Teens. When I bought it, I thought it was going to be a watered down version of the Financial Fitness book. Boy was I wrong. Financial Fitness is meant for adults that have made financial mistakes. It gently takes them through a systematic path of getting grownups back on track.

Financial Fitness for Teens, however, is a hard hitting, direct work that is meant to prevent youth from making those mistakes in the first place and setting them up to live their purpose, instead of working for the debt providers.

So this is where parenting comes in. Parents, make sure you are watching what your schools are teaching your children. But more important, invest in educating yourselves so you can then educate your children. The schools are not responsible for your children's education, you are.

Tuesday, January 7, 2014

Spiritual and Temporal Self Reliance

In 2 Nephi 2:17 and 27, the prophet Lehi gave the following teaching to his son Jacob:
17 Wherefore, the Lord God gave unto man that he should act for himself. Wherefore, man could not act for himself save it should be that he was enticed by the one or the other.
27 Wherefore, men are free according to the flesh; and all things are given them which are expedient unto man. And they are free to choose liberty and eternal life, through the great Mediator of all men, or to choose captivity and death, according to the captivity and power of the devil; for he seeketh that all men might be miserable like unto himself.
Or as Canadian business leader, Claude Hamilton states:
When you take the easy way out, life will get harder. But if you take the hard way out,  life will get easier. 
There has been a battle that has raged since before time. Not necessarily a battle of good versus evil, but a battle of agency versus control. The very first battle recorded in scripture is that of Lucifer offering to remove our agency so that everyone would be saved. No one would make a mistake, no one would suffer. Sounds enticing, but to remove agency, to take control away from us is to put us in bondage and captivity.

Satan continues this same battle for control in today's world, although he now seeks to take our agency so that we would not return to live with Father. As I have pondered the bonds that the devil seeks to put upon us, they seem to come in four areas: Habitual, Spiritual, Financial and Potential

Habitual bonds range from addictive substances and activities to small things that have crept into our routine. At the least these habits crowd out the important things for those of lesser importance. While some are harmless is small doses, we need to keep our guard up not to let them become entrenched and leave no room for the important things in our lives. Things like TV, movie watching, sports, games (including, but not limited to video games), shopping, traveling and pleasure reading are fun diversions, but if not kept in check can leave little room for what we know we should do.

Spiritual bonds are those that keep us from having the full measure of the Spirit in our lives. Any time we disobey the commandments, we distance ourselves from the Spirit. As we lose the ability to receive inspiration we find our decisions lead to more bonds, in an ever downward spiral.

We have been warned many times of the bondage of debt. However this, like the other bonds, can weasel it's way into our lives. There is a series of cartoon videos based on the scriptures. Each video is pretty expensive, and there are a lot of them. Years ago I signed up to receive one video a month, at around $40 each, until we had the entire set. The way it was set up was as a debt, that you could not cancel until you had purchased the entire set. So every month for years we had this $40 payment. I can't tell you how much I look forward to this small, draining payment leaving our budget this March.

Potential bondage deals with what we do with ourselves. Society pays us for the value we add to it. The more valuable we can make our contribution to society, the more society can reward us. L. Tom Perry said:
Education has, of necessity, become a lifelong pursuit. We must, in our scheduling of time, allot sufficient time to educate ourselves for now and for the future.
It may not be practical to get a formal education, especially with the continual rise in the cost and the usual mounting debt that it accompanies. However, you can access a vast store of education through many resources which can improve your value to society. Free of charge you have access to your local library. There are tremendous educational resources available on the internet (however, use caution in choosing sources for the information).

President Harry Truman was considered one of the least educated presidents by some, and yet by others he was considered the most educated. One thing he was proud of was the fact that he had read every book in the Independence Library.

In Doctrine and Covenants 88:78-80,118 it states:
78 Teach ye diligently and my grace shall attend you, that you may be instructed more perfectly in theory, in principle, in doctrine, in the law of the gospel, in all things that pertain unto the kingdom of God, that are expedient for you to understand; 
79 Of things both in heaven and in the earth, and under the earth; things which have been, things which are, things which must shortly come to pass; things which are at home, things which are abroad; the wars and the perplexities of the nations, and the judgments which are on the land; and a knowledge also of countries and of kingdoms— 
80 That ye may be prepared in all things when I shall send you again to magnify the calling whereunto I have called you, and the mission with which I have commissioned you.
118 And as all have not faith, seek ye diligently and teach one another words of wisdom; yea, seek ye out of the best books words of wisdom; seek learning, even by study and also by faith.
We are commanded to learn the gospel as well as natural science, history and politics. And to do this, we are commanded to seek out of the best books.

These four areas all intertwine. Often people do not evaluate how they improve their potential and obtain mountains of education debt (which cannot be wiped out). Others seek to offset their lack of improving their potential by purchasing items on credit, starting a downward spiral of finances that forces them to spend their time chasing the dollar so they can pay their debt instead of setting aside some resources and time to improve their value to society. Some waste their time, money and potential chasing after addictive substances to "escape" only to find that the only true escape from the trials we face are in seeking the Spirit more abundantly in our lives.

Imagine that each day we are given 24 Gold Coins. Turns out the medium of exchange is Silver, so we exchange 8 of our Gold Coins for 8 Silver Coins to buy the things we need. Then imagine that we can buy luxuries with pennies, so we exchange 3 Silver Coins for 3 Pennies. Each day we are given 24 hours. Time is the most precious resources as we cannot make more of it. Our time on earth is fixed. Many of us trade 8 hours for money that we use to buy the necessities. How much we get for that time depends on how much potential we realize and how much we have invested in ourselves, or, how much value we can add to society. Then with a portion of our money we get into debt, essentially selling future hours we have not even worked yet to buy something we don't need, with money we don't have, to impress people we don't like.

How do we escape the downward spiral of the Spiritual, Habitual, Financial and Potential bonds? Let me illustrate with a story. There was a small town in the old west. Unlike my hometown, as children grew up they wanted to raise their families in that same small town. As the town grew, the outgrew the small valley they were in. Not to far away was a much larger valley that could support their town for generations. The only problem was, there was not water in that valley. So they built a canal from a river some distance up in the mountains down to the valley. Since the survival of the town depended on this canal, the town hired a ditch rider to ensure the canal was in good repair.

Every day the ditch rider would ride the narrow trail along the canal from the town up to the source at the river. He would patch up the canal where needed and even anticipate future problems and prepare the canal to avoid a disruption in the water flow. One such problem was the increase in water flow from storms. The ditch rider and his two sons would take 8 hour shifts in the barn loft looking for storms. When signs of a storm were seen, the ditch rider would go to the source and place a small dam in the canal to prevent the rushing water from destroying the canal, and then after the storm passed, he would remove the dam and allow the water to continue to flow to the town.

A reporter from back east was studying the city governments of the west and was particularly interested in this town, and it's government position of ditch rider. He set up camp just outside town, at the base of the mountain where the canal came in. That night the ditch rider's son woke up the ditch rider to alert him to an oncoming storm. Rain had already started to fall and the wind pulled at the ditch riders coat as he raced along the narrow, and now muddy, trail along the canal to the river. The reporter saw the ditch rider as he attempted to secure the flaps of his tent. He gave little thought to the crazy horse rider as listened to the wind howl against his tent, other than to question his sanity.

The next morning the air was calm. The reporter stepped out of his tent just in time to see the tired, wet ditch rider slowly ride down the trail. The reporter asked the ditch rider if he was the rider he had seen the night before during the storm. When the ditch rider confirmed his suspicion, the reported asked him if he was crazy to ride on such a narrow, muddy trail at such a speed during the storm. The ditch rider responded that it was trivial, as he and his horse rode that trail every day. They new every twist and turn, every rise and fall.

Another example along the same lines is the story of the 10 virgins. Remember that the 10 virgins do not represent the populace at large, but those of the kingdom of heaven. In Matthew 25:1-13 it states:
1 Then shall the kingdom of heaven be likened unto ten virgins, which took their lamps, and went forth to meet the bridegroom.
2 And five of them were wise, and five were foolish.
3 They that were foolish took their lamps, and took no oil with them:
4 But the wise took oil in their vessels with their lamps.
5 While the bridegroom tarried, they all slumbered and slept.
6 And at midnight there was a cry made, Behold, the bridegroom cometh; go ye out to meet him.
7 Then all those virgins arose, and trimmed their lamps.
8 And the foolish said unto the wise, Give us of your oil; for our lamps are gone out.
9 But the wise answered, saying, Not so; lest there be not enough for us and you: but go ye rather to them that sell, and buy for yourselves.
10 And while they went to buy, the bridegroom came; and they that were ready went in with him to the marriage: and the door was shut.
11 Afterward came also the other virgins, saying, Lord, Lord, open to us.
12 But he answered and said, Verily I say unto you, I know you not.
13 Watch therefore, for ye know neither the day nor the hour wherein the Son of man cometh.
In the book "Faith Preceds the Miracle," Spencer W. Kimball states:
Attendance at sacrament meetings adds oil to our lamps, drop by drop over the years. Fasting, family prayer, home teaching, control of bodily appetites, preaching the gospel, studying the scriptures—each act of dedication and obedience is a drop added to our store. Deeds of kindness, payment of offerings and tithes, chaste thoughts and actions, marriage in the covenant for eternity—these, too, contribute importantly to the oil with which we can at midnight refuel our exhausted lamps.
So how do we avoid the Spiritual, Habitual, Financial and Potential bonds? We ride the trail daily to the source. It is the small, seemingly insignificant daily habits we form by our persistence in doing those small actions. We don't add them all at once. Just as Jesus grew line upon line and precept upon precept, we make small commitments to improve ourselves daily until those daily actions become habits. Then we can take on another small improvement.

The church has two "All is Safely Gathered In" pamphlets (food storage and finances) as well as a booklet entitled "One for the Money." You can get these from the Ward clerk. These small pamphlets give valuable ideas on where to start adding small habits to work towards to prevent us from falling into bondage. They include:
  • Avoid Debt
  • Budget
  • Work towards 3 month food storage and then 1 year's
  • 72 Emergency kit
  • Water storage
  • Financial Reserve
  • Teach your family these principles
  • Be properly insured
N Eldon Tanner stated:
Nothing seems so certain as the unexpected in our lives. With rising medical costs, health insurance is the only way most families can meet serious accident, illness, or maternity costs, particularly those for premature births. Life insurance provides income continuation when the provider prematurely dies. Every family should make provision for proper health and life insurance.
The last, and most important principle in preventing our bondage is best illustrated in a story of another small western town. This town was at the foot of the rockies in the 1860's or 1870's. They also were completely dependent on water, but didn't have a canal, their sole source was the rain. One year a terrible drought hit. The towns people came to realize that if it did not rain within a week, the town would have to be abandoned. The set aside a day of fasting and worship. The drove their horses and wagons with everything they owned and hitched them up outside the town hall (which was also their church and schoolhouse). If there was no rain, they would be leaving the town hall that day never to return.

Once in the hall they sang hymns. Each member stood up and shared. Some shared deeply spiritual, faith filled messages. Some shared practical messages. This went on until lunch when the all filed out of the hall to feel a breeze (remember, no A/C) and water the horses. Afterwards they returned to the hall to continue singing hymns and sharing their thoughts.

Then in late afternoon they heard a clap of thunder, followed by the sound of rain striking the roof. They poured out through the double doors to enjoy the heaven sent rain. They cheered danced in the rain. Then in all the commotion the noticed the people in the middle of the crowd were silent. As the crowd parted one girl was seen in the middle with an umbrella.

This girl knew the result of faith. She had ridden the narrow path to the source of that faith many times. When everyone else was preparing to abandon the town in case their prayers were not answered, this girl grabbed her umbrella so she would be prepared when their prayers were answered.

May we add to our lives the small, but important things that we already know we should be doing. Do them until they become habits that crowd out the unimportant and insignificant. Take the small steps daily to become who Father intends you to be. And be prepared for the miracle He will perform in your life.

Note: This was taken from notes used for a message delivered in church on December 29, 2013. While the scriptural references, quotes and general structure are the same as the message delivered that day, the flavor was very much different. I have tried to remember how it was different and cannot recall. I guess you better not miss church.

Both the story of the Ditch Rider and the Umbrella girl were stories shared in a speech given by Oliver DeMille.

Monday, January 7, 2013

MM: Diamond Jim

Excellent song about Too Big To Fail banks. Happy Movie Monday.

Monday, December 31, 2012

WW: Mentor


 [men-tawr, -ter]   Example Sentences Origin


  [men-tawr, -ter]  Show IPA
a wise and trusted counselor or teacher.
an influential senior sponsor or supporter.
verb (used without object)
to act as a mentor: She spent years mentoring to junioremployees.
verb (used with object)
to act as a mentor to: The brash young executive did not wish tobe mentored by anyone.
1740–50;  after Mentor  (< Greek Méntōr )

MM: The Fun Theory: Fast Lane Elevator

Movie Monday with The Fun Theory. Life can be made better and fun. What have you done to make everyday life fun? How can we constantly remind ourselves to look for the fun in life?

Monday, December 24, 2012

MM: Validation

Movie Monday: It's nice to be important, but it is important to be nice